Is the industry becoming ruthless in tough times?

Late last week, I got back-to-back calls from two vendors of American Freight, the retail chain based in Delaware, Ohio.

Prior to operating as American Freight, the chain of some 300 stores was formerly better known as Sears Surplus, Sears Outlet.

According to my sources, each of the vendors, along with many other of American Freight’s suppliers, had been called to a two-day meeting at the retailer’s headquarters.

From what I have been told, the purpose of that meeting, which the vendors say was headed by American Freight’s Chief Merchandising Officer Alissa Ahlman, was allegedly to request that all vendors in attendance find a means to bypass their independent sales reps and, in doing so, give the value of the rep’s commission back to the retailer.

Naturally, the first thing I did after hearing these allegations was to leave emails and voicemails to Ms. Ahlman to give her an opportunity to either confirm or deny these allegations.

It has now been a number of days since I attempted to reach out to the retailer, but my requests for comments have gone unanswered.

So, in the spirit of fair play, let me state that since Ahlman, or anyone else from American Freight has not responded to my emails or voicemails, the claims that the retailer is encouraging vendors to eliminate their reps has not been confirmed.

However, since I heard these claims from more than one source — and since the claim in each case was identical — I am going to write the rest of this column on the assumption that the vendors’ information is correct.

So, from that assumption, I think that while tough times call for tough decisions, this move on the part of American Freight goes far beyond tough. In my book, and in my opinion, it is unfair and ruthless.

Again, assuming the vendor’s claims are accurate, my second reaction (my first reaction being outrage) might have me wondering about the fiscal soundness of any retailer who suddenly seemed to need a rep’s commission.

Just for the proverbial grins and giggles, let’s use 2% as a yardstick for what the rep’s commission would normally be for selling to American Freight.

First off, a good rep delivers far more in value, market intelligence, in-store training and product knowledge than his or her 2% commission.

And let’s also take a look at the signal being sent by any retailer who asks the vendor to essentially take bread off the rep’s table, so the retailer can have an extra slice on his.

Lastly, I think a move like this has the potential to open the door to a flurry of litigation on the part of the rep, depending upon the wording and previous agreements made between the rep, the factory and possibly the retailer.

In a perfect world, the rep is one of three legs on that three-legged stool. The retailer is the second leg, with the supplier representing the third leg.

All three are needed in order to keep the stool level, balanced and sturdy.

However, that’s how it should be in a perfect world. Clearly, when things like this allegedly happen, we don’t live in a perfect world.

It seems as times get tougher, it is becoming perfectly acceptable to make decisions that are so far from perfect as to be just plain wrong.

To hear about this alleged request from American Freight, on the heels of the recent shutdown at Klaussner Furniture, makes me begin to question the ethics — or lack of them — bubbling to the surface.

I wonder how some 900 workers felt the day that Klaussner turned off the lights without warning?

I guess I should not be surprised. Sadly, we’ve seen this happen over and over, especially when venture capital peeps get involved. Need proof? Just ask the folks who once worked at Furniture Brands, Art Van, Levitz, etc.

I had lots of friends at Klaussner and they told me none of the executives gave them the courtesy of a face-to-face to deliver the bad news. Word that they were out of work somehow made its way throughout the office and factories and by 5 p.m. that day, there was a burly guard at the entrance to the facility.

The company blamed the shutdown on sudden and unexpected news that the lender had pulled out. Seems more likely that the shutdown was the result of bad management.

It’s too late to say anything to the executive team at Klaussner (other than thanks for nothing), but assuming the situation at American Freight is as those vendors told me it is … my final thought is this: Do you really need the rep’s couple of points that badly?

12 thoughts on “Is the industry becoming ruthless in tough times?

  1. Thanks for bringing this to the surface — I believe that good manufacturers /suppliers should always back thier rep team — the hunters and gathers — the unpaid product developers — the unpaid sales event creators — the unpaid knowledge providers — the guys and gals that fight to get the right design and price for thier biggest retailers behind the scenes… I can go on —

    1. Thanks, Jim!
      I agree 100%. But to be fair, just like with any channel of distribution, we have all stars, heros, competent and less thans. The goal is for each of us to be the best we can be. You have always brought your A-game!

  2. I have about 20 manufacturers’ reps assigned to me for my retail furniture store that does a few million dollars in sales per year. I’d say 6 are great, 4 are okay, and 10 are awful. The 10 awful ones just forward any requests we have to the manufacturer to the point where we just go directly to the manufacturers’ HQ now. We only see these reps at Market and they never stop by our showroom. And we are in a big Southeastern city metro that is easy to access. I only write this because SOME reps don’t deserve their commission. I’m not saying it is the case here, but it is probably true of some of them with American Freight. As you say Ray, do they really need the 2%? I don’t want the 2% back to me as a retailer. But I’d like to see that 2% be invested in a more robust customer service team at a manufacturer’s HQ that can answer calls and emails efficiently.

    1. Michael, in addition to writing for HNN, I serve as the Executive Director of IHFRA. And from that perspective, I have to say not all reps are created equally….some are far better than others. In my mind, a great/good rep should make you, the retailer, feel like he is part of your team. A reps that only knows how to wave a sales sheet in front of a customer does all reps an injustice. This is a relationship, partnership business. At the end of the day, it is (or should be) all about the win/win and upping our individual and collective games. Thanks for weighing in. You make good points!

  3. Ray
    Thank you for this fantastic article in such a timely manor. I remember when Thomasville decided to fire its entire sales team. That proved disastrous for them and started their complete downfall. If sales reps didn’t exist in our furniture industry, the retailers would never be able to fill that void. First they don’t have the manpower and it would cost them a total fortune if they did. Who would help them select the right product for their store? Who would have the knowledge to train the store’s employees on new products? Who would help set up distribution that was fair for the entire territory. Who would advise the retailer on advertising, e-commerce, success stories in the industry, and constant updates to help their business but the sales rep. Most reps treat their business dealings with the retailer as though they were their partner. Most reps have become very close friends with their retailers. It’s all about partnership. The more money a rep can help the dealer make the more the more they both become successful.
    In closing, if American Freight led a meeting to furniture retailers to find a way to bypass all their reps, they lost their minds!!! They would be sending their members to their demise. And if some of those retailers are that stupid to think this makes sense then they will loose everything quickly.

    1. Thank you, Jack. As to the state of that retailer, I couldn’t say. I will say that I have seen posts on social media platforms that speculate as to the well-being of the company.

  4. Great article, Ray. You’re absolutely right – sales reps are a critical part of our industry. The vast majority of reps that I’ve worked with over the years have earned every cent of their commission, and then some. Eliminating the rep force just shifts the cost of their services to another part of the company. Having a strong local representative that understands the retailer’s business and builds a strong rapport with the owners, buyers and retail salespeople are incredibly important. Thanks again for a great article.

  5. Ray
    I Found this when I did a Google search on American Freight. You would think they are still back in the caveman mentality.
    American Freight Furniture and Mattress to Pay $5 Million to Settle Nationwide EEOC Sex Discrimination Suit
    National Retailer Refused to Hire Women in Sales or Warehouse Jobs, Federal Agency Charged
    BIRMINGHAM, Ala. – American Freight Management Company, LLC, which does business as American Freight Furniture and Mattress, will pay $5 million in monetary relief and provide job opportunities to women previously denied them, among other relief, to settle a federal nationwide sex discrimination lawsuit brought by the U.S. Equal Employment Opportunity Commission (EEOC), the federal agency announced today.
    I think it says a lot about how they !!think!!

  6. Ray, you are missing the point on this article. American Freight did not “grow” out of Sears Outlet. American Freight was a 25 year success story prior to the combining of AF and SO. one a great company, driving bottom line results and the other a tired, old retail model trying to survive – Sears Outlet was lucky that American Freight was there to bail them of the steady downhill slide of Sears Outlet. First the SO team, replaced or marginalized all the AF leaders who had successfully engineered an extremely impressive sale to the team at FRG, with all the same inexperienced leaders that took Sears Outlet to the bottom, they took it even further by replacing the SO team, with executives from @home. When did American Freight ever look like @Home? what is the synergy there?

    only point i agree with is that AF is desperate. The last straw is when the head merchant of AF left the company before this debacle you talk about. the industry can smell the fear and desperation in AF’s actions. its a race to the bottom for them, unfortunately.

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